M-Q1: In 34 C.F.R. § 668.71(a), the Department identifies actions it may consider taking in response to a finding that an institution has engaged in substantial misrepresentation. What process will the institution be provided to contest the action that the Department initiates?

M-A1: The institution will be entitled to receive the full benefit of the process that applicable law requires the Department to follow with respect to the type of action that it initiates. There is nothing in revised section 668.71(a) that reduces the procedural protection given by the HEA and applicable regulations to an institution to contest the specific action the Department may take to address substantial misrepresentation by the institution.

For example, section 487(c)(3) of the HEA requires the Department to provide an institution “reasonable notice and opportunity for a hearing” before the Department suspends, terminates, or fines an institution that has engaged in substantial misrepresentation. (20 U.S.C. § 1094(c).)

Revised section 668.71(a) provides that if the Department is going to take any of these actions, it will proceed under 34 C.F.R. Part 668, Subpart G—the same notice and opportunity for a hearing that has always existed for institutions that face an action the HEA addresses in section 487(c)(3). In addition, section 498c(h) of the HEA authorizes the Department to provisionally certify an institution, and to terminate such a certification for cause. (20 U.S.C. § 1099c(h).)

If the Department revokes the participation of an institution that is provisionally certified, the procedures described in 34 C.F.R. § 668.13(d), not those in Subpart G, govern the process afforded the institution. (34 C.F.R. § 668.81(c)(4).) An institution’s program participation agreement requires it to provide prospective and enrolled students with accurate information about its programs, charges, and the employability of its graduates. (20 U.S.C. §§ 1092(a)(1),
1094(a)(7).)

If the Department determines that substantial misrepresentation by a provisionally-certified institution demonstrates that it is unable to meet these obligations, 34 C.F.R. § 668.71(a)(1) provides that the Department may revoke that institution’s title IV participation. If it does so, the Department will offer the institution the opportunity provided in 34 C.F.R. § 668.13(d) to contest that action. [Guidance issued 3/17/2011]

M-Q2: Do the misrepresentation regulations create a private right of action?

M-A2: No. As stated in the preamble to the final regulations (75 FR 66916, Oct. 29, 2010), nothing in the regulations alters a student's ability to pursue claims of substantial misrepresentation pursuant to State law, and nothing in the regulations creates a new Federal private right of action. The regulations are intended to make sure that institutions are on notice that the Department believes that substantial misrepresentations constitute a serious violation of an institution’s fiduciary duty, and that the Department will carefully and fairly evaluate claims of substantial misrepresentation before determining an appropriate course of action. [Guidance issued 3/17/2011]

M-Q3: Do the misrepresentation regulations extend beyond substantial misrepresentations made about the nature of an eligible institution’s educational programs, its financial charges, or the employability of its graduates?

M-A3: No. The Department recognizes that section 487(c)(3)(A) of the HEA provides the Department with the authority to act in response to substantial misrepresentations that may be made in three broad areas. The Department will not evaluate, nor potentially sanction, institutions for their substantial misrepresentations that do not fall within one of these three categories. Thus the revised regulations in 34 C.F.R. Part 668, Subpart F continue to offer a “scope and special definitions” section, and then provide specific discussion of the three regulated areas of potential substantial misrepresentation. [Guidance issued 3/17/2011]